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MILTON FRIEDMAN: Nixon was the most socialist of the presidents of the United States in the 20th century.
INTERVIEWER: I've heard Nixon accused of many things, but never [of being] a socialist before.
MILTON FRIEDMAN: Well, his ideas were not socialist, quite the opposite, but if you look at what happened during his administration, first of all, the number of pages in the Federal Register, which is full of regulations about business, doubled during his regime. During his regime the EPA, the Environmental Protection Agency, was established and the OSHA, the Occupational Safety and Health Administration, the OECA [the Office of Enforcement and Compliance Assurance of the EPA] -- about a dozen, a half-dozen alphabetic agencies were established so that you had the biggest increase in government regulation and control of industry during the Nixon administration that you had in the whole postwar period.
INTERVIEWER: Tell us how Nixon decided to adopt wage and price controls.
MILTON FRIEDMAN: Nixon, as you know, had been in the price control organization during World War II and understood that price controls were a very bad idea, and so he was strongly opposed to price controls. And yet, in 1971, August 15, 1971, he adopted wage and price controls. And the reason he did it, in my opinion, was because of something else that was happening, and that had to do with the exchange rate; that had to do with Bretton Woods and the agreement to peg the price of gold. The United States had agreed in 1944, at the Bretton Woods Conference, on an international financial system under which other countries would link their currencies to the U.S. dollar, and the United States would link its currency to gold and keep the price of gold at $35 an ounce. And because of the policies that were followed by the Kennedy and Johnson administrations, it had become very difficult to do that. We had had inflationary policies, which led to a tendency for the gold to flow out, for the price of gold to go above $35 an ounce. And the situation had become very critical in 1971. Nixon had to do something about that. If he had done nothing but close the gold window, if he had said the United States is going off the gold standard and done nothing else, every headline in every newspaper would have been, "That negative Nixon again! Just a negative act." And so instead he dressed it up by making it part of a general economic policy, a recovery policy, in which wage and price controls, which the democrats had been urging all along, became a major element. And by putting together the combination of closing the gold window and at the same time having wage and price controls, he converted what would have been a negative from a political point of view to a political positive. And that was the political reason for which he did it.
INTERVIEWER: There is a photograph of you and George Shultz with Nixon in the Oval Office. What did you say to him on that occasion? What did you tell him?
MILTON FRIEDMAN: Well, I don't know what occasion that particular one was, but the one that's relevant to your question is the last time I saw Nixon in the Oval Office with George Shultz. What we usually discussed when Nixon wanted to talk was the state of the economy: what monetary policy was doing.
Nixon was a very, very smart person. In fact, he had one of the highest IQs of any public official I've met. The problem with Nixon was not intelligence and not prejudices. The problem with him was that he was willing to sacrifice principles too easily for political advantage. But at any rate, as I was getting up to leave, President Nixon said to me, "Don't blame George for this silly business of wage and price controls," meaning George Shultz. And I believe I said to him, I think I said to him, "Oh, no, Mr. President. I don't blame George; I blame you! " (laughs) And that, I think, was the last thing I said to him. Now, the interesting point of that story is that the Nixon tapes are now available, and I have been trying to get that part of the Nixon tapes, but I haven't been able to get them yet. I want to make sure I didn't make this up.